In this issue:

IMF's Economic Advice Behind The Unraveling of Egypt

Obama Expanding Permanent War Policy

Brits Propose Breaking Up Afghanistan, Pakistan

From Volume 38, Issue 34 of EIR Online, Published September 2, 2011
Southwest Asia News Digest

IMF's Economic Advice Behind The Unraveling of Egypt

Aug. 22 (EIRNS)—A Foreign Policy magazine article, "The Road to Tahrir," which was based on the writer's discussions with a number of economists, documents how the advice of the IMF, and conditionalities associated with it, were the root cause of the unraveling of Egypt in the recent period.

The article points to the IMF interventions that began in earnest in the 1990s, when loans from the United States and the Paris Club (an informal group of private creditors from 19 of the world's biggest economic powers) were written off, and Egypt was showered with some $15 billion in emergency economic assistance. Such generosity had an ulterior motive. It was to move Egypt, and its leaders, out of Gamal Abdel Nasser's "statist" regime into a free-wheeling free-market regime.

The aid, critical though it was to reviving Egypt's then-failed banking sector and stabilizing the economy, contained the seeds of Mubarak's eventual destruction, the article said. Conditioned on a demanding IMF restructuring program, the loans required that Mubarak cut government services, liberalize interest rates, and undertake an ambitious privatization program. They required, as Dina Shehata, a senior researcher at the Al-Ahram Center for Political and Strategic Studies, has argued, that Mubarak break "Nasser's bargain"—a promise to provide social services, employment, subsidies, education, and health care in exchange for exercising total control of the political environment. But, that was only the beginning.

As the IMF-led reforms progressed, laws were enacted to protect laborers from the potentially harmful side effects of liberalization, but there was often "a lack of popular or political will to enforce them," Bruce Rutherford, an assistant professor of political science at Colgate University, told Foreign Policy in an interview. The result was that "tens of thousands of workers lost their jobs and access to subsidized housing." At the same time, across-the-board subsidy cuts dictated by the IMF restructuring program further eroded "Nasser's bargain" with the people, and compounded the plight of working class Egyptians. Although bread subsidies remained intact—a near revolution in 1977 after President Anwar Sadat tried to revoke them was enough to keep them off the chopping block this time around—the number of subsidized household items was slashed from 18 to 4 (bread, wheat flour, sugar, and cooking oil), according to Rutherford.

As occurred in every country where the IMF was allowed in, Egypt had to follow the road to its economic and leadership destruction. The IMF demanded liberalization, and Egypt's GDP showed "growth." An IMF report in 2007 heaped praise on the "reformist cabinet" for pressing ahead with adjustments despite vocal opposition, "fuelled in part by high food-price inflation and some frustration about the lag in the 'trickle down' of the benefits of growth."

However, for many Egyptians, the impressive growth numbers, simply meant layoffs, pay cuts, forced early-retirement schemes, and the loss of benefits. The impact of reform on employment was so pernicious, in fact, that Stella, Egypt's local beer, and Coca Cola were the only two cases where privatization led to an increase in the number of jobs, according to Joel Beinin, a professor of Middle East history at Stanford University.

Along came the membership in the World Trade Organization (WTO) in 1995. This only made things worse for many Egyptian laborers, as reduced tariff and non-tariff barriers impeded the state's ability to protect certain labor-intensive sectors. Egyptian textiles, an industry that dates back to the age of the Pharaohs, suffered mightily as Chinese and Southeast Asian producers took advantage of reduced tariffs to expand their market share. There was little doubt beforehand about how this would impact the Egyptian labor force: One USAID report in 2004 projected that the textile industry would lose 22,185 jobs and about $203.9 million in shipments, a figure that represented roughly 4% of the country's non-oil sector exports.

A footnote: Despite the success story of Egypt's "growth," even the IMF data show the following: The long view from 1990-2008 reveals an equally telling 1.2% rise in joblessness. Meanwhile, the income share of the top 10% of wage earners increased massively between 1990 and 2008, and the top 1% made out like bandits.

Obama Expanding Permanent War Policy

Aug. 20 (EIRNS)—The Libya war precedent, based on lies told to international partners at the United Nations, was intended by British-puppet Obama to open the door to further regime change actions, with Syria targetted next. And that's what's happening.

On Aug. 18, President Obama, reportedly over the objections of Secretary of State Hillary Clinton, openly demanded that Syrian President Bashar al Assad step down, prompting questions of possible military action by the United States. In the aftermath of that declaration, the European Union acted yesterday, to expand its sanctions against the Syrian regime and pave the way for sanctions on its oil exports. According to the Wall Street Journal Aug. 20, the EU has already imposed a travel ban, an asset freeze, and an arms embargo on 35 individuals and four entities. An oil embargo would be significant: About 90% of Syrian oil exports go to the EU. Such a step would further destabilize the region and move closer to war.

The Obama Administration is also moving to keep the two wars in Iraq and Afghanistan (already the longest in U.S. history) going even longer. Secretary of Defense Leon Panetta told journalists on Aug. 19, that the Iraqi government has already agreed with the United States that U.S. troops should remain in the country beyond the Dec. 31, 2011 deadline for complete withdrawal. "My view [sic] is that they finally did say yes, which is that as a result of a meeting that Talabani had last week, that all of the—it was unanimous consent among the key leaders of the country to go ahead and request that we negotiate on some kind of training, what a training presence would look like," Panetta said, according to a partial transcript that was released by the Pentagon. As soon as the story hit the Internet, however, the Maliki government denied that there was any deal. "We have not yet agreed on the issue of keeping training forces," spokesman Ali Mussawi told the French press agency, AFP. "The negotiations are ongoing, and these negotiations have not been finalized."

Then there's Afghanistan, where NATO announced with great fanfare last year, that the NATO mission would come to an end at the end of 2014. The Daily Telegraph of London reported today, that the U.S. and Afghan governments are close to finalizing an agreement that would keep U.S. forces in the country until at least 2024. Not only would they include trainers for the Afghan army and police, but also special forces and air power.

Most other interested parties, including Iran, Pakistan (privately), and Russia reacted against this news. Andrey Avetisyan, Russian Ambassador to Kabul, said: "Afghanistan needs many other things apart from the permanent military presence of some countries. It needs economic help and it needs peace. Military bases are not a tool for peace. I don't understand why such bases are needed. If the job is done, if terrorism is defeated and peace and stability is brought back, then why would you need bases? If the job is not done, then several thousand troops, even special forces, will not be able to do the job that 150,000 troops couldn't do. It is not possible."

Brits Propose Breaking Up Afghanistan, Pakistan

Aug. 25—After helping to intensify extreme instability with the aid of their allies, Saudi Arabia and the Obama government in the United States, Britain's empire-servers are calling for breaking up both Afghanistan and Pakistan as the way to "solve" the existing crisis.

A British Tory Member of Parliament and a former British Army personnel, Tobias Ellwood, has called for a decentralized political system for Afghanistan that would "bring fruitful results for the British government." He has proposed the division of Afghanistan into eight states, whose capitals would be Kabul, Kandahar, Herat, Mazar-i-Sharif, Kunduz, Jalalabad, Khost, and Bamiyan. In his plans for disintegrating Afghanistan, Ellwood has proposed that foreign countries directly influence the decisions made in the political systems of these eight states. Based on Ellwood's plans, the control over some areas of Afghanistan should be handed over to the Taliban so that they would become part of Afghanistan's political system.

A week before, a Chatham House member of Pakistani origin called for the disintegration of Pakistan and laid the basis for an active intervention by NATO in Karachi, where endemic violence has brought the most important Pakistani port-city to its knees. The proposal called for dividing Pakistan into six entities, namely, Independent Kashmir, Pakhtoonistan, Baluchistan, Punjabistan, Jinahpur, and Sindhudesh.

The Chatham House member's proposal is in line with the proposal made in 2006 by Lt. Col. Ralph Peters, Deputy Chief of Staff for Intelligence, in the U.S. Defense Department. Peters's concept of a redrawn Middle East was presented as a humanitarian and righteous arrangement that would benefit the peoples of the Middle East and its peripheral regions. According to Peters: "International borders are never completely just. But the degree of injustice they inflict upon those whom frontiers force together or separate makes an enormous difference, often the difference between freedom and oppression, tolerance and atrocity, the rule of law and terrorism, or even peace and war."

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